Lanka Rating Agency places Union Bank’s ratings on positive watch
Monday, 1 September 2014 00:00
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Lanka Rating Agency has placed Union Bank of Colombo’s (UBC or the Company) respective long- and short-term financial institutions ratings of BBB and P3 on a rating watch, with a positive outlook.
The rating watch was triggered by the announcement on 14 August from the Company to the Colombo Stock Exchange (CSE) that the Board of Directors had resolved to issue by way of private placement 742,156,249 ordinary voting shares at a consideration price of Rs. 15.30 to Culture Financial Holdings (CFH) an affiliate of TPG a leading global private investment firm with over $ 59 billion of capital under management.
Under the agreement, TPG will invest up to 70% of the issued share capital, and warrants that, if exercised in full within their six-year term, would increase TPG’s interest in UBC to 75%. The Central Bank of Sri Lanka (CBSL) approved TPG’s investment in UBC on 6 August.
Following the private placement, the investor is expected to make an offer under the Company Takeovers and Mergers Code 1995 (as amended in 2003) to the other shareholders of UBC to acquire up to the number of shares that the Investor may acquire and hold under the approval granted by the CBSL.
The issue of the shares under the private placement, the issue of the warrants and the general offer are subject to certain conditions, including, but not limited to, shareholder approval of the transaction and certain regulatory approvals.
UBC is expecting to leverage on TPG’s operational expertise and global resources to strengthen Union Bank’s balance sheet and expand its franchise.
Lanka Rating Agency’s Rating Watch highlights a possible change in rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rating under special surveillance.
Appearance on Lanka Rating Agency’s Rating Watch, however, does not inevitably mean that the existing rating will be changed. It only means that a rating is under evaluation and a final affirmation is expected to be announced.
A ‘positive’ outlook indicates that a rating may be raised while a ‘negative’ outlook indicates that a rating may be lowered. A ‘developing’ outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.
Lanka Rating Agency (LRA), former RAM Rating Lanka’s, technical partner is CRISIL India (CRISIL). CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. CRISIL is India’s leading ratings agency and is also the foremost provider of high-end research to the world’s largest banks and leading corporations. CRISIL’s majority shareholder is Standard and Poor’s (S&P). S&P, a part of McGraw Hill Financial (formerly The McGraw-Hill Companies) , is the world’s foremost provider of credit ratings.
